Investing Is Not The Same As Speculating

Mark Reza, "Because we care for each other," Roundup, March 1, apparently is confused between investing and speculating.

As far as investing is concerned, (the chart in the Roundup print edition 03/04/05) presents the results of $10,000 invested in 1961, and left invested with all dividends reinvested. The charted returns are for:

A. S&P 500

B. Thomson U.S. All Asset Alloc. Mutual Fund

C. Treasury Bills

D. Prime Bank Rate

E. For Comparison - The Cost of Living Index

The 45-year period ending in 2005 was chosen because it represents the working life of someone retiring at age 65 today. None of the investment options, over an extended period of time, compare to gambling.

As to Mark's statement that "the Chilean plan is a failure," I talked with the CATO Institute (where Jose Piñera works) recently.

The only way that the Chilean plan can be considered a failure is that only about 50 percent of the working population is enrolled in any retirement program. A large portion of the population is self-employed, and a large portion of this group is in an underground economy that makes no government reports.

The 50 percent of the economy that is employed, by reporting employers, are still covered by the government Social Security plan, or self-administered, government overseen plans, as they were at the initiation of private plans 25 years ago.

Incidentally, about 95 percent of these people are now voluntarily enrolled in private plans, and financially much better off, as a result.

As far as I can see, the main failure in Chile has been the representative government's failure to get a stranglehold on every citizen's complete financial life, as the U.S. government has done to us. Thus there is a large segment of the Chilean population that avoids many taxes, including Social Security taxes, by whatever name they are called.